Deutsche Bank Reports Loss on Acquisition Charges

The costs of acquiring Germany's largest retail bank added to the effects of a slump in stock trading.

JACK EWING

FRANKFURT — Deutsche Bank said Wednesday that it had lost money in the third quarter as the costs of acquiring Germany’s largest retail bank added to the effects of a slump in stock trading.

The €2.3 billion, or $3.2 billion, charge connected to the takeover of Postbank contributed to an overall loss of €1.2 billion, which was slightly below expectations. Analysts polled by Reuters had expected Deutsche Bank to report a net loss of €1.33 billion for the quarter after a €1.38 billion net profit in the third quarter of 2009. The bank had previously warned that it would report a loss for the period.

Like other big banks, Deutsche Bank has felt the effects of slumping stock markets. Revenue from equity sales and trading at its investment banking unit fell 25 percent to €650 million. On Tuesday the Swiss bank UBS said that its investment banking unit lost 406 million francs, or $417 million, in the third quarter, overshadowing an overall profit of 1.66 billion francs.

However, Deutsche Bank said it had seen a rebound in late September in sales and trading of debt and other products, helping that business increase revenue by 5 percent in the quarter to €2.2 billion.

“The third quarter results again prove the robustness of our recalibrated business model despite the difficult ongoing macroeconomic and market conditions,” Deutsche Bank’s chief executive Josef Ackermann said in a statement.

Deutsche Bank's acquisition of Postbank would vastly expand its branch network and more than double the number of retail customers to 24 million. Ordinary depositors have become more valuable in the banking industry now that it is more costly for banks to raise funds on wholesale money markets.

“Our retail banking operation is vastly increasing its footprint in Germany, which will balance our earnings towards an even more stable business,” Mr. Ackermann said.

Earlier this month Deutsche Bank sold new shares to raise €10.2 billion, which it will use to complete the Postbank takeover and comply with regulations requiring banks to hold more capital in reserve.

The bank said its so-called core tier one capital ratio, a measure of financial strength, was 7.6 percent at the end of the quarter, up from 7.5 percent at the end of the second quarter. The figure does not include the new capital that Deutsche Bank raised.

Regulators from the world’s largest economies have proposed requiring banks to hold core tier one capital of at least 7 percent in order to absorb unexpected losses, but the rule would not take full effect until 2019.

Deutsche Bank warned earlier this month that it would take the writedown on the value of the 30 percent stake in Postbank that it already owned. Deutsche Bank has offered Postbank shareholders €25 per share for the rest of the bank.